AUD/USD and NZD/USD Fundamental Weekly Forecast – Trade War Concerns, RBA Decision, U.S. Jobs Report – Key Market Drivers

The Australian and New Zealand Dollars closed lower during the holiday-shortened week. The price action in both currencies was driven by end-of-the-month and end-of-the-quarter position-squaring as well as appetite for risk, fears of a trade war and a smattering of U.S. and domestic economic data.

The AUD/USD settled at .7676, down 0.0002 or -0.03% and the NZD/USD settled at .7231, up 0.0002 or +0.02%. The Aussie traded down to its lowest level since December 15 while Kiwi buyers once again drew the line slightly above a key technical retracement zone.

In Australia, the economic data was light all week. HIA new home sales (0.7% vs. -2.1% prior) were better than previous figures. Reserve Bank of Australia Assistant Governor Kent suggested that the outlook for the Australian economy was upbeat. Finally, month-over-month private sector credit (0.4% vs. 0.3% expected was slightly better than expectations.

In New Zealand, the Trade Balance came in better-than-expected at 217M. Traders were looking for a 100M decline. The previous month was revised lower to 655M.

The most important report for the week was ANZ Business Confidence. It came in at -20.0, worse than the previously reported -19.0.

Building Consents rose 5.7% versus the previously 0.0%.

Forecast

The week begins with a bank holiday in Australia and New Zealand.

On Tuesday, the Reserve Bank of Australia is expected to leave its cash rate unchanged. In its Rate Statement, the RBA is expected to reiterate that the economy is solid, but it has concerns over low inflation. Therefore, it is not in any hurry to raise interest rates.

Australian Retail Sales are expected to come in at 0.3%, up from 0.1%. Later in the week, the Trade Balance is expected to show a 0.72 Billion surplus, down from 1.06 Billion.

The major reports in the U.S. include ISM Manufacturing PMI, ISM Non-Manufacturing PMI and Non-Farm Payrolls.

Several Federal Open Market Committee members are also scheduled to speak.

The tone of the week is likely to be determined by trade war fears, but the economic reports should cause periodic bouts of volatility.